Apple's market cap loses $38B this week

Apple shares threaten to drop below $500 for the first time since February

Far be it from me to criticize Apple for its falling share price. Lord knows I’ve never run a company whose share prices broke records for the highest market cap in U.S. history. But Apple’s turbulent market cap is troubling nonetheless.

Shares have been in a free-fall since the release of the iPhone 5, and now they’ve dropped even further. Apple shares fell 3.76% on Friday to close at $509.79, which is down some 27% from its high of $705 in September. Shares continue to fall in after-hours trading and currently stand at $507 as of 3pm PST.

To put that in perspective, Apple’s market cap has lost roughly $180 billion in the last three months. This week alone, Apple’s market cap fell some $38 billion.

The free-fall comes as analysts from UBS and Jeffries have both downgraded their price targets for Apple. UBS analyst Steve Mulinovich cut his price target to $700 from $780, citing several reasons, including reduced iPhone manufacturing for the March quarter, Chinese sources who say the iPhone 5 won’t do as well as the iPhone 4S, and his belief that the iPad mini will cannibalize normal iPad sales.

Mulinovich isn’t alone in his new conservative estimates of Apple shares. Earlier this week, Jefferies analyst Peter Misek slashed his price target to $800 from his previous $900, claiming that Apple’s growth is bound to slow to just 20% in 2014 as Apple products reach a saturation point in developed markets.

The average price target among Wall Street analysts is $754.

But Gene Munster of Piper Jaffray is sticking to his guns with his $900 price target, claiming that Apple shares have risen every year due to new product launches. Munster believes that 2013 will be the year that Apple launches a television as well as a new low priced iPhone for the pre-paid market.

Indeed, UBS’s Mulinovich is also optimistic that Apple will continue to innovate, which is why he maintains Apple’s “buy” rating.

It’s also worth pointing out that even though Apple’s market cap has fallen nearly 30% from its record high this year, share prices are still up more than 25% from the beginning of the year.

If there’s one thing Apple is known for, it’s surprising people with new product categories. Apple may struggle with the competition over the next year or two as iPhone penetration slows and tablet sales slow, but it will come back with something better.